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April 1996
Volume 2 Number 5
1996 Job Outlook: The New York–New Jersey Region
James Orr and Rae D. Rosen
The New York–New Jersey region’s hard-earned recovery in employment is being overshadowed
by ongoing job losses in certain sectors and the prospect of moderating growth in the United
States as a whole. Fortunately, several positive trends are bolstering the region’s employment
picture. Strength in the services sector, a falloff in restructuring, and gains in income point to
continuing—though modest—regional job growth in 1996.
U.S. economic growth is expected to moderate mildly
in 1996 as the nation’s expansion matures.1 This slowing comes in the fourth year of the New York–New
Jersey region’s recovery from its steep 1989-92 downturn. Like other measures of the region’s economic
vitality, job growth has improved at a very modest pace
over the last three years. In 1995, it was just under 1.0
percent, slightly below the rate achieved in previous
recoveries.
This edition of Current Issues presents the 1996
employment outlook for the region as a whole and for
New York State, New York City, and New Jersey individually. We explore current employment trends in the
area’s five major sectors—finance, manufacturing,
government, transportation and public utilities, and services—and assess each sector’s potential for generating
new jobs in the region.
Could a leveling off of the nationwide expansion halt
the already tentative job recovery in the New York–
New Jersey region? Although moderating growth in the
United States as a whole is expected to restrain job creation in New York and New Jersey, it is not likely to
derail the region’s employment recovery. Indeed,
although conditions are by no means booming, an
analysis of employment trends indicates that the
region’s job growth is expected to reach 0.8 percent in
1996. These continued modest job gains can largely be
attributed to the slackening pace of public and private
sector restructurings and to the steady growth in services and income. These developments have put the
regional economy on a sounder footing, even as the
nation’s economy cools. Moreover, the region’s relatively weak population and labor force growth should
keep the unemployment rate on a downward track
throughout the year.
Job Picture: 1996
The recovery of employment in New York and New
Jersey has been significantly weaker than for the nation,
and neither state has yet recouped the jobs lost during
its 1989-92 downturn (Chart 1).2 Nevertheless, recovery was increasingly evident in both states in 1995, with
employment in the region expanding by 0.9 percent.
Despite the economic slowing projected for the United
States as a whole, our 1996 outlook sees the region
maintaining modest job growth of around 0.8 percent,
or roughly 90,000 jobs (see table). About two-thirds of
these new jobs are expected to be generated in New
York and a third in New Jersey, a distribution that
reflects the relative size of the two states. The rate of job
growth should prove about the same in the two states.
New York and New Jersey’s subpar employment
performance relative to other regions is not surprising
CURRENT ISSUES IN ECONOMICS AND FINANCE
developments within the region that will influence job
growth throughout 1996.
in and of itself. Because the region is relatively
mature, the pace of job growth here generally lags that
in other parts of the country. 3 In this recovery, however, region-specific developments increased this gap:
severe restructuring in the manufacturing and government sectors together shaved 0.3 percentage points off
job growth in 1994 and another 0.4 percentage points
in 1995, making New York and New Jersey’s employment performance among the weakest in the nation.
By contrast, Colorado, Florida, and North Carolina,
fast-growing states where new job creations more than
offset job losses caused by restructurings, recorded
employment growth in the range of 3 to 4 percent.
Fortunately, the restructurings in manufacturing and
government in New York and New Jersey are not
expected to constrain growth in 1996 as severely as in
1995. As a result, the region has begun to get back on
its feet, and a modest advance in job growth seems
highly probable.
Finance: Weak Job Prospects. For the nation,
financial employment is likely to expand moderately in
1996, by slightly more than 1.0 percent, despite ongoing consolidation in the banking industry and restructuring in the insurance industry.4 Overall, growth in the
securities and brokerage industry, real estate, and other
investment advisory services should lead to net gains in
total financial employment.
At first glance, the U.S. outlook for the financial
industry would seem to bode well for the New York–
New Jersey region. The area is rich in finance jobs—a
large number of the nation’s largest banks, brokerage
firms, and insurance companies are headquartered in
the two states. Fully 30 percent of the nation’s brokers
work in New York City, and the region commands a disproportionate share of the nation’s employment in
banking and investment advisory services. The
prospects for gains in this sector, however, remain
bleak. As has been widely reported, large banks such as
Chase Manhattan Bank and Chemical Bank are merging and reducing staff. Moreover, although securities
The job picture in the region varies substantially
across sectors. In the manufacturing and government
sectors, job losses will continue, although the rate of
loss should ease. To date, planned reductions in state
and local government are well below the level of layoffs in 1994 and 1995. Consolidation trends are also
expected to keep employment in the utilities and banking sectors under pressure. By contrast, the largest sector, services, will continue to expand, although at a
somewhat slower pace. This expansion will help
counter some of the losses in other sectors.
Employment Forecast for the New York–New Jersey
Region
Annual Percentage Change
New York–New Jersey
New York State
New York City
New Jersey
To clarify how the region’s sectors will fare relative
to their national counterparts, we begin the employment outlook for each of the five major sectors with a
brief review of U.S. sectoral trends. We then examine
Chart 1
105
100
All of these factors are likely to produce a moderate
decline in aggregate financial employment in New York
City and New York State in 1996. Even in New Jersey,
where the small securities sector is expanding rapidly,
growth is not projected to offset the losses resulting from
bank mergers and restructurings in the insurance industry.
New Jersey
New York
New York City
90
1989
90
91
92
93
94
95
96
Manufacturing: Declines Slowing. Following a
nominal gain in 1995, the nation’s manufacturing work
force is expected to contract as inventory corrections,
Source: U.S. Department of Labor, Bureau of Labor Statistics.
Notes: The partial government shutdown and the severe weather reduced
employment in January 1996. Shaded area denotes a national recession.
FRBNY
1996
0.8
0.8
0.5
0.8
employment is expanding nationally, the trend toward
decentralization in this industry is being felt with particular force in the New York–New Jersey region.
Retail offices are increasingly being opened in other
states because consumer demand for services has
grown at a more rapid pace elsewhere in the country. At
the same time, some back-office operations are relocating to states with lower operating costs.
United States
95
1995
0.9
0.7
0.2
1.5
Note: The values for 1996 are projections.
Recent Trends in Regional Employment
1989=100
110
1994
1.1
0.8
0.6
1.7
2
slackening demand, and gains in productivity reduce
the need for blue collar labor. Manufacturing employment could decline by as much as 1.0 percent in 1996.
these losses mean that the long-term decline in manufacturing employment is likely to continue, though at a
slower pace.
The New York–New Jersey region, however, seems
to be following a different course. In 1995, manufacturing jobs fell about 1.4 percent, despite stability in manufacturing employment nationwide (Chart 2). The
decline reflected downsizings and major restructurings
in defense-related firms, pharmaceutical companies,
and a number of prominent manufacturers in the region,
including IBM, Xerox, and Kodak. The expected contraction of the nation’s manufacturing work force this
year, however, is not projected to lead to greater sectoral job losses in the region. The decline in the number
of deep restructurings by manufacturers in New York
and New Jersey will help to offset the adverse national
effects on regional employment, so that job losses are
expected to reach only 14,000 in 1996—about twothirds the number of losses in 1995 and equivalent to a
scant 1.0 percent of regional manufacturing employment. These losses will exert less of a drag on overall
job growth in 1996.
Government: More Losses. Across the nation,
employment is being pared down as Congress
attempts to “right size” federal government. At the
same time, however, many states and local areas are
hiring more workers to service a growing population
and handle problems that have devolved to lower levels of government. In 1996, state and local government employment is generally projected to increase
roughly 1.0 to 1.5 percent.
Such gains, however, are not expected to show up in
the region. In contrast, we expect state and local government employment here to decline in 1996, as New
York State, New York City, and, to a much lesser
degree, New Jersey attempt to balance slow revenue
growth and reductions in taxes. Widening budget gaps
have already led to official announcements of job
reductions and decreased spending for some programs
and services. New York is expected to reduce state
employment again this year, bringing the total loss to at
least 15,000 jobs over the 1995-96 period. New York
City reduced city payrolls by 22,800 jobs in 1995; it is
likely to lose at least another 5,000 jobs in 1996.
Although the State of New Jersey hired nearly 8,000
additional employees in 1995, budget considerations
may force minor job losses this year.
Within the region, manufacturing employment in
New Jersey is expected to be hit somewhat harder than
in New York.5 Declines in manufacturing jobs are projected to continue across the board, with losses in New
Jersey’s pharmaceutical and chemical companies
weighing down the entire sector. In New York City, the
recent revisions in employment figures show that the
city lost 7,300 manufacturing jobs in 1995, whereas
preliminary data had indicated a gain of more than
3,000 jobs. Combined with a contraction in employment in upstate and western New York (Bram 1996),
Transportation and Public Utilities: Restructuring
Continues. A variety of industries make up the transportation and public utilities sector, including air, rail,
and water transportation; freight handling; transportation services; telecommunications; cable television;
Chart 2
Weak Sectors in the New York-New Jersey Region
1989=100
110
1989=100
120
100
110
Manufacturing Employment
Government Employment
United States
United States
New Jersey
90
100
New York
New Jersey
80
90
New York
70
80
1989
90
91
92
93
94
95
96
1989
90
91
92
93
Source: U.S. Department of Labor, Bureau of Labor Statistics.
Notes: The partial government shutdown and the severe weather reduced employment in January 1996. Shaded area denotes a national recession.
3
94
95
96
CURRENT ISSUES IN ECONOMICS AND FINANCE
and electric and gas utilities. Dramatic restructurings,
new lines of business, and new kinds of business characterize several segments of this sector, particularly the
telephone and cable television industries. On balance,
job gains will outweigh job losses and, at the national
level, employment in this sector is projected to increase
a moderate 1.0 to 1.5 percent in 1996.
service employment of around 1.5 to 2.0 percent—
good, although not as robust as the nation’s gains.
Decentralization and the maturity of the New York–New
Jersey region limit opportunities for growth. Still, the
healthy state of regional income (see box) is helping to
create retail jobs. Many smaller industries such as private education, business services, motion pictures, consulting, and wholesale trade will also add jobs and fuel
expansion in the service sector.
In the transportation and public utilities sector in the
New York–New Jersey region, more than 5,000 jobs
were created in 1995, a gain of almost 1.0 percent.
Industries leading job growth included trucking and
warehousing, transportation services (for example,
ticketing, travel agencies, tours), and the nontelephone
segment of the communications industry. In 1996, however, declines of about 7,000 jobs in this sector are
forecast for the region. The substantial downsizing at a
number of AT&T facilities in New Jersey is a major
source of the decline. PSE&G, New Jersey’s largest
electric and gas supplier, has also announced a consolidation. In New York, job losses are expected to continue
within the telecommunications industry, but they
should slow from their 1995 pace.
Job growth in regional health care and social services should also prove moderately strong in 1996,
although the rate of growth is likely to slow from the
pace of the 1990-95 period (Lowenstein 1995). The
slowing largely reflects state and local budget constraints, which are putting pressure on the public
monies that fund many of these private services.
Changes in the delivery and administration of health
care by health maintenance organizations are also easing the pace of demand for health care and social service professionals.
With its heavy concentration of service employment, the New York–New Jersey region might be
expected to add service jobs faster than the nation.
Two factors will, however, constrain growth in services here. The f irst is decentralization. The hegemony that the region once held in advertising, law,
accounting, and public relations is gradually eroding
as firms relocate or decentralize their operations. For
example, local companies conducting business abroad
consult foreign legal advisors, and several local
advertising firms have relocated to states with lower
operating costs.
Services: Mainstay of Job Growth. Service jobs
are the key source of employment growth for the nation
(Chart 3). Modest economic growth typically results in
increased demand for consumer services such as health
care, education, amusement, and recreation and for
business services such as advertising, legal counsel, and
computers. In 1996, service jobs are generally projected
to increase by 2.5 to 3.0 percent at the national level.
Service jobs are also the main contributor to
regional job growth. We anticipate gains in regional
Chart 3
Growth Sectors in the New York-New Jersey Region
Percentage Change from Twelve Months Earlier
Percent
10
Percent
6
Business and Consumer Services Employment
8
Health and Social Services Employment
United States
New Jersey
5
6
4
United States
4
2
New Jersey
0
3
-2
New York
-4
2
New York
-6
-8
1
1991
92
93
94
95
96
1991
92
93
94
95
96
Source: U.S. Department of Labor, Bureau of Labor Statistics.
Notes: The partial government shutdown and the severe weather reduced employment in January 1996. Shaded area denotes a national recession.
4
FRBNY
The second constraint is the maturity of the New
York–New Jersey marketplace. Important sources of
regional job growth such as private education and
health care expand more slowly here than at the
national level because New York and New Jersey have
long-established systems of comprehensive health care
and private education. As a result, both sectors command a much larger share of employment in the region
relative to the nation and to other states. The existing
base and concentration of such jobs as well as the slow
rate of population growth in the area limit the potential
for future expansion.
Private sector growth rates in New York and New
Jersey were not that far apart at 1.3 and 1.8 percent,
respectively. In New Jersey, trade, service, and construction jobs will slow from healthy 1995 levels, and
manufacturing jobs are expected to continue their
decline. Although New Jersey’s government sector is
likely to experience only minor job losses, projected
job declines in commercial banking and at AT&T are
expected to hamper state job growth.
What events could alter our 1996 forecast?
Congressional proposals to reduce the budget deficit
could have a dramatic impact on state revenues and the
health care system in New York and New Jersey, but
these effects are more likely to be felt over the longer
term. Of more immediate concern are the large budget
gaps in New York State and New York City for the
upcoming fiscal year. 6 The prospective gaps have
forced the governor of New York State and the mayor of
New York City to announce reductions in state and local
employment as well as cuts in program spending, and
the final job losses may be greater than planned.
Prospects and Risks at the State Level
Overall, a modestly improved job performance is projected for New York State and New York City in 1996.
In New York City, a relatively healthy trade and services sector should offset continued consolidation in
the financial sector. In addition, the slower pace of government downsizing should decrease the drag on
growth in the private sector this year. New York State
job growth will be buoyed by strength in New York
City’s performance and by a moderate expansion of
trade and service jobs statewide. New York State’s manufacturing sector is expected to show further—though
moderating—declines.
Conclusion
Despite a possible slowing in the nation’s recovery and
some weak local sectors, the economy of the New
York–New Jersey region is expected to record modest
job growth of roughly 0.8 percent in 1996. Given the
slow rate of labor force growth in the region—below
0.5 percent—the modest expansion of jobs should be
sufficient to push the area’s unemployment rate downward throughout 1996.
In New Jersey, the rate of job growth, although
roughly equal to that of New York State, will slow from
its 1995 pace. New Jersey’s superior 1995 performance
relative to New York was largely the result of sharp
cuts in public sector employment in New York State.
The Income Picture: Another Measure of Economic Health
cial sector reported gains of 25 percent in New York
State and 40 percent in New York City. In New Jersey,
nonfinancial wages rose 5.4 percent in the first quarter of 1995, while financial wages rose 12 percent.
We estimate New York–New Jersey’s growth in personal income to range from 6.0 to 7.0 percent, compared with an annual average gain of 2.9 percent in
U.S. wage rates and a 6.7 percent annual gain in personal income.
Although the New York–New Jersey region remains
one of the lowest ranking U.S. regions in terms of job
growth, it has experienced strong income gains in
recent years. These gains help to offset the effects of
continuing job losses in manufacturing and other sectors. Indeed, it is the strength in income that underlies
our projection for relatively healthy growth in services and retail jobs.
How does the region rank in terms of income?
New Jersey usually competes with Connecticut for
first place in per capita state income. In recent years,
New York State has ranked among the top five states.
Full data for 1995 income will be available for both
states in summer 1996. Preliminary data for New
York show that wages, the largest component of
income, grew robustly in the f irst six months of
1995. Nonfinancial wages overall rose 7.5 percent in
New York State in the first quarter of 1995 as wages
increased sharply in each major industry. The finan-
Thus, although job growth, an important barometer of economic health, remains low, income levels in
New York and New Jersey are high and income
growth is reasonably strong. This trend is likely to
continue throughout 1996. Compensation got off to a
promising start with a boost from large bonus payments—close to $2 billion in the banking and securities industries. These moderately strong gains in
income figure importantly in our forecast for job
growth in 1996.
5
FRBNY
CURRENT ISSUES IN ECONOMICS AND FINANCE
Where will the region experience the strongest
growth? A sectoral analysis shows that business, consumer, and health services are likely to be major
sources of new jobs in the region. Nevertheless,
although job growth in these sectors is expected to be
relatively strong, decentralization trends and the maturity of the region’s marketplace are likely to keep gains
at roughly one-half the projected rate for the nation.
The news for the area’s other sectors is mixed.
Consolidations, mergers, and relocations will prevent
finance, historically a key sector for the region, from
generating new jobs in 1996. Losses in the manufacturing and government sectors will continue at a more
modest pace than in 1995 but will still impede growth.
The transportation and public utilities sector is also
expected to experience job losses, which will reverse
the sector’s employment gains in 1995.
Clearly, the New York–New Jersey economy is still
getting back on its feet from the steep decline at the
start of the decade and the industry restructurings of
the past several years. Nevertheless, while certain sectors will continue to suffer losses, overall job growth is
expected to edge up. Strength in the services sector, a
slowdown in restructuring, and gains in income are all
cause for optimism.
Endnotes
1. The Blue Chip Consensus forecast for 1996 puts annual growth in
GDP (chain-weighted 1992 dollars) at 1.9 percent, down from an estimated 2.1 percent in 1995 (Blue Chip Economic Indicators 1996).
2. All regional employment data used in the article are payroll data
from the benchmark revisions released in February 1996. The data
in Charts 1 and 2 are indexed to compare growth rates of New York
(Endnote 2 Continued)
and New Jersey with those of the nation. In these two charts, we set
employment equal to 100 at the peak of the regional business cycle
in 1989 (index 1989=100). Increases in this index represent higher
levels of employment relative to the peak, while decreases represent
lower levels of employment relative to the peak.
3. Links to the national economy were derived from regressions of
quarterly national job growth rates on New York State and New
Jersey job growth rates between 1969 and 1995. The regressions
yielded coefficients of .76 and .91, respectively. Region-specific
factors can influence state growth rates considerably.
4. All sectoral employment projections presented in this article are
compiled from several sources, including the WEFA Group and
DRI/McGraw-Hill. Our expectations of employment growth in the
region are conditional upon the U.S. forecasts.
5. Although the two states are expected to lose a roughly equal
number of manufacturing jobs, the proportion of losses differs: the
decline is about 1.6 percent of manufacturing employment in New
Jersey and about 0.6 percent in New York State.
6. The fiscal year for New York State begins in April 1996; for New
York City, July 1996.
References
Blue Chip Economic Indicators. 1996. Vol. 21, no. 3, March 10.
Bram, Jason. 1996. “Dynamics of the Second District Economy.”
Federal Reserve Bank of New York Current Issues in Economics
and Finance 2, no. 2.
DRI/McGraw-Hill. 1996. Review of the U.S. Economy. February.
Lowenstein, Ronnie. 1995. “The Health Sector’s Role in New
York’s Regional Economy.” Federal Reserve Bank of New York
Current Issues in Economics and Finance 1, no. 5.
The WEFA Group. 1996. “U.S. Economic Outlook.” March.
About the Authors
James Orr and Rae Rosen are senior economists in the Domestic Research Function of the Research and
Market Analysis Group.
The views expressed in this article are those of the authors and do not necessarily reflect the position of
the Federal Reserve Bank of New York or the Federal Reserve System.
Current Issues in Economics and Finance is published by the Research and Market Analysis Group of the Federal
Reserve Bank of New York. Dorothy Meadow Sobol is the editor.
Editorial Staff: Valerie LaPorte, Mike De Mott, Elizabeth Miranda
Production: Graphics and Publications Staff
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